Information Technology Editor
DIRECTORS of the troubled technology group AST hope investors will view it with renewed confidence as it secures a R60m loan and plans a rights issue to raise R87m to pay off debts and boost working capital.
A three-pronged package had been structured to put AST on a firmer footing and reshape it into "a very good ongoing business" by 2004, said CEO John Miller. "We have restructured our debt, brought money into the company, and identified costs to take out. We have a very sound underlying business."
Step one will see its 30,5% shareholder Kumba and the Standard Bank provide a R60m loan. That will give AST "breathing space" by covering any shortfall before the cash generated by its operations can fully support the business.
Step two is a rights issue for September, underwritten to the tune of R88,7m by the Standard Bank, Kumba and Cadtech. New shares will be issued at 9c each.
Step three is the restructuring of debts, with some to be repaid after the rights issue, and others having their repayment dates deferred by 12 months.
The recapitalisation will let AST conduct a thorough overhaul without being distracted by financial concerns. Each division will be assessed for its value to the group and to identify where costs can be cut.
Barnard Jacobs Mellet analyst Craig Hackney said it was disappointing that AST needed a bridging loan and a rights issue, as that implied that the overhaul alone was insufficient. In response, financial director Marthinus Erasmus said the recapitalisation would give the directors time to carry out the restructuring and to allay fears that AST could be brought down by impatient creditors.
AST ran into problems when it spent too much buying companies which were never properly integrated and which duplicated existing operations, creating a complex group with a weak balance sheet and poor cash management.
Miller said the overhaul would take two years to complete and the full impact would only be felt in the next and 2005 financial year. So far nine divisions had been shed.
The Bottom Line: Page 10
May 16 2003 07:10:59:000AM Lesley Stones Business Day 1st Edition
Friday
16 May 2003
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